Dairy farms are getting bigger. As the number of dairy farms decreases, along with the number of cows being milked nationwide, the total amount of milk being produced, increases. Not only are cows producing more milk each day, they are doing so on larger and larger farms.
According to the article “Milk Production Continues Shifting to Large-Scale Farms,” by James MacDonald and Doris Newton, published in the December 2014 issue of Amber Waves, the USDA’s Economic Research Service’s magazine focusing on ERS research, analysis and policy issues related to agriculture, food, the environment, and rural America, dairy farming consolidation has been pronounced since 1992. In an industry where the number of dairy farms has decreased by 60 percent in the past two decades, this market reduction makes the possibility of starting small and mid-sized farming operations more difficult.
The mean size of dairy farms has increased from 61 cows in 1992, to 144 cows in 2012. While that doubling-and-then-some might not seem too significant, it is the midpoint herd size statistics which reveal the major shift in the dairy farming sector. The midpoint number reflects that 50 percent of cows are on dairy farms smaller than that size, while the other 50 percent are on larger farms. Today’s midpoint hovers around 900, while the 1992 midpoint was a mere 101.
Beginning in Dairy
What might these statistics mean for dairy farmers just starting out? How can an aspiring dairy farmer compete with mega-dairies? Can small dairy farming be economically viable as the dairy industry becomes more consolidated?
“The shift to larger dairy farms is driven largely by the economics of dairy farming. Average costs of production, per hundredweight of milk produced, are lower in larger herds, and the differences are substantial,” MacDonald and Newton wrote.
The authors cite USDA statistics which put the average cost per cwt at $39.11 for dairies milking less than 50 cows, while the cost decreases to $13.80 per cwt for dairies with 1,999 cows or more. Even more sobering, the returns exceed the cost of production only 2.8 percent of the time on the smallest dairies, but do so over 80 percent of the time in the largest category, if the fully annualized cost of capital and labor are calculated.
While recognizing that many small dairies are now becoming profitable via niche enterprises — bottling their own milk, making cheese or other products, breeding and selling stock or offering agritourism, the authors conclude that “if they (small dairies) don’t provide a return on capital, few people would be willing to reinvest in them or start new small dairies.”
With those staggering statistics stacked against them, beginning dairy farmers do have challenges to face. But there are some who are defying the odds. Kevin Dietzel, of Lost Lake Farm in Iowa, is one of them. Dietzel started a small dairy farm on 85 acres of rented land with the intention of making cheese. The land, owned by his uncle, was purchased so that the Dietzels, who could not otherwise find affordable farmland to purchase or lease, could rent the acreage to develop a grazing dairy, where all the milk produced is made into farmstead cheese.
The lack of infrastructure and equipment has been their biggest hurdle, after the issue of acquiring land at an affordable price, Dietzel, a presenter for a Practical Farmers of Iowa webinar “Getting Started in Dairy”, said. His goal is to build a 20-cow milking herd. He purchased several Brown Swiss heifers, as well as Holstein-Jersey crosses, and is breeding via artificial insemination to Normandy genetics. He is not producing any saleable milk yet, and is keeping calves on their mothers as long as possible. He works off-farm, as does his wife, while they build their dairy and creamery operation.
Dietzel currently milks only as needed, one time per day, in a temporary stanchion set-up built outdoors alongside his garage. He has built an open-sided pole barn, and is in the beginning stages of construction for milking and cheesemaking facilities. With plans to graze the herd, he is focusing on renovating depleted pastures. He has had issues with not being able to harvest forage crops when needed, because he does not own the equipment needed himself.
Other programs, such as the University of New Hampshire’s Organic Dairy Research Farm, operated by the Agricultural Experiment Station and College of Life Sciences and Agriculture at UNH, are also devoted to research and education which can help keep small dairy farms viable. With the premium for certified organic milk, and a growing demand, organic dairying is seen as a viable small farming opportunity for new farmers, as well as existing small dairies opting to transition into this more lucrative milk market.
As per a 2013 survey conducted by UNH researcher and professor Dave Townson, Lisa Townson, assistant director of UNH Cooperative Extension, André Brito, assistant professor of organic dairy management, and André Pereira, doctoral student in dairy nutrition, in conjunction with the Northeast Organic Dairy Producers Alliance, a fair and stable milk price is the number one concern of northeast organic dairy farmers. While the organic milk price has been increasing, the cost of organic feed inputs has increased more rapidly, reducing the profit margins on organic milk. The average size of the 183 northeast dairy farms surveyed was 309 acres and 57 milking cows. Seventy-three percent of the farms surveyed purchased grain, but grew their own forages.
While reducing feed costs is one way to increase the profit margin on any dairy, capturing more of the retail price of the milk is certainly gaining in popularity, as more small dairy farmers plan divert milk from the bulk tank, or forego that market altogether, either selling their milk directly to the consumer, or using it to produce their own value-added dairy products. The expense of creamery equipment and the logistics of meeting regulatory requirements can also be a barrier for small farms, although their is a growing market for farmstead dairy products.
“The average age of dairy farmers in Maine is nearly 60,” Herring said. According to Herring, many current operators are teetering on the edge of viability, with not enough new farmers entering into the growing organic dairy industry. “One way to help address this is to provide this training as a way to reduce the barrier to entry for new organic dairy farmers,” he said. Herring hopes this training will help improve the chances that the graduates will be successful operators.